Myer at new low as Solomon Lew strikes

Myer shares plumbed new depths yesterday as billionaire Solomon Lew renewed his withering attack on the retailer’s board.

Shares in Myer closed at a new low of 52c yesterday

Myer shares plumbed new depths yesterday as the department store owner’s biggest shareholder, billionaire Solomon Lew, renewed his withering attack on the retailer’s board with a stinging rebuke of executive chairman Garry Hounsell, whom he labelled “incompetent” and “discredited”.

Possibly adding to the selling pressure on Myer shares yesterday, Mr Lew, one of the nation’s richest businessmen, warned investors that the financial and debt strain on Myer meant it might soon stop paying dividends.

“It is simply a matter of time until Myer will cease to pay a dividend,’’ Mr Lew said.

Former Myer chief executive Bernie Brookes, who ran Myer after it was sold to private equity and when it was floated on the ASX in 2009, told The Australian that Mr Hounsell had contacted him last week and the pair discussed the retailer’s operations.

Mr Brookes gave Mr Hounsell his views on the ills now facing Myer and said he would continue to talk to the executive chairman, both as a former Myer CEO and its largest private investor with a stake of 2 per cent.

Ramping up his attack on Mr Hounsell — Myer’s recently anointed executive chairman who took on full-time executive duties at the department store following last week’s shock departure of chief executive Richard Umbers — Mr Lew’s fashion conglomerate Premier Investments has called on support from other shareholders to tip out the entire Myer board.

In a letter to be sent to Myer shareholders, Mr Lew says: “Myer has a discredited chairman for a CEO, a failed board, a dead strategy, declining sales and profits, an artificially inflated balance sheet and massive liabilities.”

Premier, Myer’s biggest shareholder with a stake of 10.8 per cent, last week obtained an updated copy of Myer’s share register to communicate with other investors in the lead-up to Premier calling an EGM to sack the board.

In his letter, Mr Lew attacks the retailer’s board for its disastrous sales over the crucial Christmas period and a collapsing share price. Myer was floated at $4.10 a share in 2009.

“It is with no great joy that I am writing to you again in relation to the declining fortunes of the company we jointly own, Myer (IPO price $4.10 a share, currently 55c a share),” Mr Lew says in his letter to Myer shareholders.

“You will remember that, at the Myer annual general meeting in November last year, we sent the Myer board a very clear message that their time was up. Strike one, and potentially one to go this coming AGM. On behalf of Premier Investments Limited I would like to thank all of the Myer shareholders who supported our efforts to hold the Myer board accountable.

“In the past two months, there have been two more ‘surprise’ sales and profit downgrades issued by the Myer Board. Myer’s sales declined 5 per cent in the Christmas period, and 6.5 per cent during their January clearance.

A share price for Myer

“These are disastrous numbers and their effect is that the already-reduced profits of the company will fall significantly and may even be completely wiped out,’’ Mr Lew wrote.

“We shareholders need to brace ourselves for the end of any dividends from Myer.

“If this out-of-touch incompetence wasn’t causing all Myer shareholders significant value destruction, it would be comical.”

Shares in Myer closed at a new low of 52c yesterday, down 3c.

The Premier boss has repeatedly accused Mr Hounsell of lacking retail experience.

In his letter he also scoffed at Mr Hounsell’s admission in a press conference last week that he was not a regular online shopper, describing himself as “old-fashioned”.

Mr Hounsell also couldn’t detail Myer’s debt and banking covenants — which could be breached soon thanks to upcoming asset impairments — which Mr Lew has also savaged.

Mr Lew repeated his argument that the $600 million “New Myer” strategy — aimed at turning round the retailer — was a failure.

“It is clear from Mr Umbers’ departure that not only the board-endorsed “New Myer” strategy, but also the “New, New Myer” strategy, are dead and buried,” he wrote.

“Any remaining doubt that Myer is in peril should now be removed from the minds of all of shareholders.”

Mr Lew writes: “The man who has now decided to pay himself an additional salary to be executive chairman of this mess, Garry Hounsell, has demonstrated a total lack of judgment in the way he has acquitted himself in the role of chairman, and deserves neither to be appointed nor paid.”

Myer declined to comment yesterday.